2. HMRC use criminal interview techniques
The interview is a fabulous opportunity for HMRC to start wearing you down. Psychologically they hold all the cards: you’ll be invited into their office where there will be two investigators who will know the ropes and the games. You will know nothing and if you are (god help you) unrepresented you are in for a grim time.
HMRC love meetings and their enquiries manual makes no bones about how important they think they are, “Meetings play a vital part in full enquiries under SA [Self Assessment] and will often be appropriate in aspect enquiries of substance.”
HMRC use the same open questioning techniques as the police but unlike a formal arrest you will not receive any kind of warning that what you say will later be used against you. Another important difference is that your ordeal will not be recorded – so if push comes to shove (and it will) it is going to be your word against theirs about what was said.
Phil Berwick, director of tax investigations atTenon said that in a recent case an unrepresented tax payer went to a meeting that ended up lasting five hours, “The individual was so upset and aggrieved at being subjected to this ordeal that they thought it would be easier to agree with the inspector [rather] than resist further.”
In the absence of hard evidence HMRC will put the pressure on and then try to build a case against you based on your recorded income and estimates of your expenditure. Ah-ha! Now you can see why HMRC think meetings are so important!
They ask if you go out for meals – how often? And do you like a drink? Do you buy drinks for friends? And do you smoke – if so how many? These questions are all framed in a friendly chat but everything is being stacked up to use against you later.
It’s easy to find yourself saying, “Yes, actually I am a bit of a bon viveur who likes five pints a night and a chaser at the end – and friends? Well of course, a whole gang! And do I get the drinks in? I should think so, I’m a very generous sort you know!”
All that information is being jotted down and will then be rounded up and scaled back over five years.
HMRC will say, “You earn ‘X’ we believe your lifestyle costs ‘Y’ so we are going to tax you on the difference.” Oh and then they will add penalties and interest too.
HMRC are well within their legal rights to do this.
About a week after the interview you will be posted the HMRC interview notes to sign. These will have shockingly little resemblance to what was actually said at the meeting.
Raise this issue and they will say, “The notes are not meant to be verbatim – I need you to sign and return them.”
If you refuse to put your signature to the notes (you are under no legal obligation to sign) you will be asked why you are unhappy with them. Small changes will then be made and then new notes will come.
See schedule item 5 for a real example of this.
Former Revenue investigator and now consultant to HMRC Simon Sweetman says, “I have worked with Inspectors who thought it a victory if the taxpayer cried…”
Nice.
What you need to know:
• The tax payer is in no way legally obliged to go to an interview and – in the opinion of many accountants – it’s an exercise solely for the benefit of HMRC. But – and here is the rub – if you refuse to attend the interview this can be considered ‘non co-operation’ by HMRC and so may result in a fine.
• If you decide to attend an interview you can ask for a pre-meeting agenda. If the investigators go off agenda you can refuse to answer the questions. If the inspector is foolish enough to give you an agenda so detailed it lists questions you can answer them and say, “I now see no reason for an interview.”
• You can have the interview at the location of your choice, choose to have it on neutral territory – if you have an accountant ask to use his office. Don’t let the tax inspector visit your workplace or home – it will just lead to more fishing.
• You can record the interview – so an accurate record of what has been said is kept.
• As a rule you should have as have as little contact with HMRC as humanly possible. HMRC take away peoples’ cars and houses, marriages break up under the stress and fathers lose contact with their kids – all because they say the wrong thing at the interview.
The final decisions are not the final decisions, the final documents are not the final documents, the last figures are not the last figures. This is Hell.
Let’s say the investigation is officially over and HMRC send you closure notices which state “I have now completed my enquiry into your Tax Return for the year ended…” – sounds pretty final doesn’t it? But it’s not.
In the event you choose to appeal HMRC’s calculations they may well choose to re-evaluate the entire case and in that process the figures will be reinterpreted and more expenses will be disallowed, the result is that your tax bill could well triple!
The new figures come through the door with a thud and a small ream of explanation. But the real message in that ream could be put down in one sentence on one side of one page of A4: “If you are going to fuck with us we are going to fuck with you.”
Yes, that’s what happens when you start to use your right to appeal – and it’s common practice.
